Inside This Issue - Opinion
PhRMA: What's ahead for biopharmaceuticals in 2013?
January 7th, 2013
by John Castellani
It’s human nature to look ahead to the New Year. What will 2013 hold for America’s biopharmaceutical research sector? Well, quite a bit.
We will join other stakeholders in the dialogue over the role of health care costs in our nation’s economic challenges. We will help implement and work to improve the health care reform law. We will engage with the Food and Drug Administration to shepherd implementation of the recently reauthorized prescription drug user fee program. We will approach these efforts and other issues focused on policies that foster innovation, sustain and create American jobs, and provide patients with broad access to new, lifesaving medicines.
But it’s time to look beyond one-year or even 10-year time frames. With due respect to the “Year Ahead” convention, policy advocates and lawmakers must take a longer view of biopharmaceutical innovation and its value for patients, our health system and our economy.
Nearly every aspect of innovative medicines — from the R&D process to the incremental nature of medical progress to the delicate balance of innovation and access in the prescription drug life cycle — takes time, patience and perseverance. All can be at odds with the relatively short time lines set by investors and policy makers. But by shifting our mind-set to realizing long-term value created by biopharmaceutical innovation, we can realize nearly endless possibilities.
Biopharmaceuticals Help Control Health Care Costs
Despite medicines accounting for a small percentage of U.S. health care spending, many policy makers view medicines as a cost driver. Evidence demonstrates the opposite is true.
Last November, for instance, the Congressional Budget Office (CBO) released a report describing how it is revising its methodology for estimating the financial impact of future legislation affecting prescription drug utilization. The CBO now recognizes that policies that result in greater use of prescription medicines in Medicare lower spending on other medical services.
This historic change aligns with other independent research showing the value of medicines to patients and our health care delivery system. A 2010 Journal of the American Medical Association study, for instance, found that improved access and adherence to medicines promoted through Medicare Part D saves Medicare about $1,200 per year in hospital, nursing home and other costs for each senior who previously lacked comprehensive drug coverage. Separately, Harvard Medical School researchers found that nearly 11 million seniors gained comprehensive drug coverage through Medicare Part D. All told, savings to Medicare in 2007, the first year of Part D, exceeded $13.4 billion — more than one-quarter of the program’s total cost during that time.
Simply put, Medicare Part D has exceeded nearly all expectations. It is the rare government program that both performs well and costs far less than anticipated. Ninety percent of Part D enrollees are satisfied with their coverage, and CBO’s latest projections show that the program costs are 43% lower than initial estimates.
In short, Part D is a success story for seniors and taxpayers.
Beyond Part D, policies and programs to improve adherence to medicines also show huge benefits. For example, researchers estimate that eliminating co-payments for patients at medium to high risk of heart disease would improve adherence enough to avoid 90,000 hospitalizations and generate savings of more than $1 billion. But such an approach to pharmacy benefit design requires a long-term vision.
If we view medicines only through a limited budgetary lens with an eye toward short-term cost cutting, we won’t realize the greater value that innovative medicines hold for patients and our health care system.
Innovation Saves Lives
The biopharmaceutical industry exists to bring new solutions to patients battling disease. Sometimes this means novel, cutting-edge advancements, more often it is incremental advances over time that lead to better treatment options and outcomes.
Thanks in part to innovative medicines, we’ve made steady progress fighting diseases such as cancer, heart disease and HIV/AIDS. Cancer survivors in the United States have increased from 3 million in 1971 to 11.7 million in 2007, and with nearly 900 new cancer medicines in development there’s real hope for more progress.
The pace of drug discovery helped cut heart disease and stroke deaths by 28% between 1997 and 2007. And since the approval of breakthrough antiretroviral medicines in the 1990s, the AIDS death rate in the United States has dropped by over 75%. What was a virtual death sentence is now for many a chronic disease.
More than 300 medicines have been approved for patients over the last decade and, according to a recent Wall Street Journal article, the FDA will likely approve more than 30 new molecular entities (NMEs) by the end of 2012. Along with the 36 NMEs approved in 2011, these medicines represent first-time and improved treatments for numerous conditions including lupus, cancers and cardiovascular disease.
With more than 3,200 potential medicines now in late stages of development or before the FDA for approval, there is hope for new ways to fight or even prevent diabetes, heart disease, cancers, rare diseases and, hopefully, Alzheimer’s disease.
Exciting possibilities in the pipeline include personalized or targeted medicines tailored to an individual’s or a subpopulations’ characteristics. A recent report from the Tufts Center for the Study of Drug Development revealed that 94% of biopharmaceutical companies are investing in personalized medicine research.
Keeping this medical revolution moving forward is essential, but, again, it takes vision.
Biopharmaceutical R&D requires an enormous investment of time, personnel and money. On average, it takes around $1.3 billion to develop a new medicine and bring it from the laboratory through FDA approval for patient use. Additionally, biopharmaceutical R&D — perhaps uniquely among high-tech, innovative industries — requires long developmental lead time, 10 to 15 years on average. While cost and long lead times have always been a challenge, we now confront an investment environment in which investors are often reluctant to pursue projects that may take many years to realize their full potential.
But even in the midst of a difficult economic period, biopharmaceutical research companies continue making enormous R&D investments. In 2011 PhRMA members alone invested nearly $50 billion in R&D. Impressively, according to the National Science Foundation, our sector accounts for nearly 20% of all R&D funded and performed by U.S. businesses — the single largest share among all U.S. businesses.
To continue this massive R&D investment — investment that over time will yield the next set of medical breakthroughs for patients — we need public policies and regulatory structures that provide incentives for risks and predictability in the drug review process. Take the recently reauthorized Prescription Drug User Fee Act, which provides FDA with stable, consistent funding for drug review and related activities, supplementing congressional appropriations.
If implemented successfully, PDUFA-V will refocus the program on its original intent — timely patient access to new medicines — while strengthening FDA’s high safety standards and helping to establish a new systemwide approach to regulatory science that embraces the scientific tools used in 21st century drug development.
The Economic Impact
Similarly, we need policies that better recognize this industry’s role in growing our national economy. America’s biopharmaceutical research companies employ over 640,000 men and women nationwide. The multiplier effect of these high-value jobs equals more than 4 million jobs. These are jobs that sustain and grow communities and jobs this country needs to remain globally competitive.
Nationwide in 2009 the biopharmaceutical industry had a direct economic impact of $382 billion and an overall economic impact of more than $917 billion. Part of this indirect impact reflects spending on vendors providing services to biopharmaceutical research facilities and manufacturing operations.
The We Work For Health program recently released 2011 vendor and supplier expenditure data from 17 biopharmaceutical companies in 17 states. These companies had a combined economic impact of nearly $53 billion with vendors and suppliers in the 17 states, and there were more than 120,800 relationships between biopharmaceutical companies and vendors.
Also, our sector helps support tens of thousands of university, hospital and research jobs conducting clinical trials of new medicines in communities across the country. Importantly, these jobs are an engine for new entrepreneurial enterprises needed to fuel and grow the larger economy.
America leads the world in medical innovation. We have an unmatched ecosystem of private and public partners —biopharmaceutical companies, start-up firms, academic institutions, government agencies, venture capitalists and more — all playing symbiotic roles to advance science and bring new health care solutions to patients. It is a resource we can’t take for granted.
Federal policy makers must recognize our value and how short-sighted policy decisions affecting biopharmaceutical companies can have long-term ripple effects throughout the research ecosystem.
Why? Take Alzheimer’s disease. According to the Alzheimer’s Association, the condition will affect more than 13 million Americans by 2050, costing our economy more than $1 trillion annually to care for AD patients. When combined with the growing incidence of chronic diseases like diabetes, cancer and heart disease, it becomes clear that we need to bolster our innovation ecosystem to meet the challenges five, 10 and 30 years down the road.
This means fighting for strong intellectual property incentives for cutting-edge innovators, both stateside and in global trade negotiations. It means protecting Medicare Part D from policies that could undermine its success and inhibit future research. It means ensuring robust coverage of medicines in state exchanges. These are some of our priorities for 2013 and beyond.
Innovative medicines and America’s biopharmaceutical research sector are a national resource that over time will help keep our families healthy, our neighbors employed and our country competitive. We’re in it for the long haul. Our policy makers need to be as well.
JOHN CASTELLANI is the president and CEO of Pharmaceutical Research and Manufacturers of America (PhRMA).